Federal Reserve Governor Daniel Tarullo on Wednesday said there is no need to raise U.S. interest rates until there is convincing evidenceinflation is moving towards the Fed’s target on a sustained basis.
Tarullo, who as a governor has a vote at every Fed policy meeting, said the cautious approach was particularly warranted as the world digests the impact of Britain’s vote to leave the European Union.
“I want to be more convinced that the underlying rate of inflation is around 2 percent,” Tarullo said at a Wall Street Journal event in Washington.
U.S. inflation outside of food and energy has edged higher since late 2015 but Tarullo said recent inflation movements were “not enough to convince me that the rate is heading in a non-transitory way to 2 percent.”
Fed officials and other central bankers are still digesting the fallout from Britain’s “Brexit” vote and Tarullo suggested it may be sometime before it is clear how that will impact different economies.
“We’ll have to watch and see over the medium term. There is a good bit of uncertainty,” he said.
The Fed held interest rates steady in June and cut the number of rate hikes it sees over the coming years, but still signaled two rate increases were likely this year. Many investors, however, doubt the Fed will raise rates at all this year.
While cautious about the outlook for inflation, Tarullo said world financial markets appeared well prepared for the impact of Brexit and that they are behaving well.
“None of us really knows the magnitude and I doubt there will be a moment when people say Brexit is done. It will be something that attenuates over time,” he said.
[“source-gsmarena”]
